At 13:06 8/11/98 -0500, you wrote: >Concerning this passage from Krugman on Pollin and Luce's book on living >wages: > >>So what are the effects of increasing minimum wages? Any Econ 101 student >>can tell you the answer: The higher wage reduces the quantity of labor >>demanded, and hence leads to unemployment. This theoretical prediction >>has, however, been hard to confirm with actual data. Indeed, much-cited >>studies by two well-regarded labor economists, David Card and Alan Krueger, >>find that where there have been more or less controlled experiments, for >>example when >>New Jersey raised minimum wages but Pennsylvania did not, the effects of >>the increase on employment have been negligible or even positive. Exactly >>what to make of this result is a source of great dispute. Card and Krueger >>offered some complex theoretical rationales, but most of their colleagues >>are unconvinced; the centrist view is probably that minimum wages "do," in >>fact, reduce employment, but that the effects are small and swamped by >>other forces. > >To Bob and others interested-- > >The impact of imposing or raising a minimum wage is not as clearcut as >Krugman suggests, even under essentially neoclassical conditions; nor is >the theoretical rationale for this ambiguity isn't particularly "complex." >I've written a paper showing that under otherwise competitive exchange >conditions, the presence of "quasi-fixed labor costs"--labor costs that >vary with the number of employees rather than the total number of hours >worked, like health insurance or lockers or office space--creates a setting >in which raising a minimum wage may increase the number of *workers* >employed, even as it reduces the total number of *hours* worked by these >employees. In this light, results such as those by Card and Krueger are >not so paradoxical. > >Gil Skillman ________________ In a course work paper for labor-economics at my graduate school, I had developed a very simple model by taking account of skilled and unskilled labor markets and linking the two markets by establishing the wages prevailing in unskilled market (say the minimum wage) as the floor for the wage structure in the skilled market. In a completely neo-classical framework, I found that a rise in minimum wage has an ambiguous effect on the demand for skilled labor, i.e. there could be an increase in the demand for skilled labor due to the rise in the minimum wage. But more importantly, I find it strange that such an intellegent man as Krugman would think that labor (power) and milk stand on the same footing in the market. The point that, within the capitalist framework itself, labor (power) is not a commodity as milk is a theoretical issue and not just a moral question--even though morality, of course, is more important than any economic question. Moreover, a rise in wages would most likely reduce the rate of profit and change all the prices. But this does not have to be necessarily inflationary as krugman suggests. Cheers, ajit sinha > > > >
